Editor's Note: Matt is traveling for the rest of this week. So today, we’ll be re-publishing a popular article from our archives. This is a natural follow-up to Wayne's article from last week, where he introduced you to the concept of a “Venture Capital Fund.” Enjoy!
Two weeks before we started sheltering in place, our friend Aitio dropped by the office.
He stops by a few times a year to say hello.
He wasn’t exactly in the neighborhood. But with his brand-new BMW X7 SUV and a full-time driver, he doesn’t mind traveling to different parts of town.
Aitio used to be a general contractor in Queens and he did pretty well. So he started investing in bars and clubs. But in 2007, he decided to invest in tech startups, instead.
He had his share of small “wins” over the years as an angel investor. But in 2012, he finally hit a homerun. Now he’ll never have to work again.
A Brilliant Investment Philosophy
When we started Crowdability back in 2014, we asked Aitio to describe his investment philosophy — and we’ll never forget his reaction:
He paused to think, stroked his well-groomed goatee, then broke into a smile.
“All it takes is one,” he said.
And that’s where he got his nickname:
A.I.T.I.O: All It Takes Is One.
Average vs. Above Average
To decipher Aitio’s philosophy, let’s review the numbers behind startup investing.
According to Cambridge Analytics (an advisor to institutions like The Rockefeller Foundation, Harvard University, and the Bill Gates Family Office), investing in startups has returned an average of 55% per year over 25 years.
That’s enough to double your money every couple of years or so.
But remember, that’s just the average. Plenty of folks — people we know and work with — have done far better than average.
For example, consider our business partner Howard Lindzon. Howard’s annual returns have been measured in the "hundreds of percent."
What’s the secret to earning triple-digit annual returns?
Let Aitio give you a hint:
All it takes is one.
You’ve Seen the Evidence
Long-time Crowdability readers will recognize our familiar stories about investors who’ve hit it big on a single investment.
Howard’s investment in Uber, for example…
For every $5,000 he invested, he got back $2 million a few years later.
That’s 400 times his money.
Then there’s Paul Graham, another startup investor. On his investment in a web service called Heroku, he earned 491 times his money.
And when he invested in Twitch, a video-game company, he earned an estimated 573 times his money.
All It Takes Is One
And here’s the thing:
Even if you make dozens of startup investments and all of them go to zero — well, all of them except one…
You could still make a fortune.
Because all it takes is one.
Enough to Retire
Let’s say you invest in 50 startups over the next few years.
You put $1,000 into each one, for a total investment of $50,000.
Based on the historical odds, it’s likely you’ll get a handful of “base hits” — enough hits to get you to the 55% annual returns we mentioned earlier.
But even if 49 of the companies go belly up — in other words, even if your first 49 investments literally go to zero…
As long as the 50th company turns out to be “an Uber” — the investment where Howard made 400 times in money — your $1,000 investment would be worth $400,000.
So your $50,000 startup portfolio would turn into $400,000.
That’s a 700% net return.
And what if you’d invested $5,000 into each startup instead?
Your stake would be worth $2 million.
For most folks, that’s enough money to retire.
And that is what’s so exciting about startup investing:
All it takes is one investment to completely change your life.
Did You Join Us Yesterday?
And if you joined me and Wayne for our online presentations yesterday, you learned how you can invest in top startup deals right alongside us.
This is Crowdability’s “Venture Capital Fund.”
We hope you enjoyed it!